Visa Volunteers?

NACS skeptical on offer to negotiate with retailers over interchange fees

Published in CSP Daily News

By  Greg Lindenberg, Online Editor

WASHINGTON -- In a move that is being greeted by skepticism by the National Association of Convenience Stores (NACS), Visa appears to be softening its hard line by telling the U.S. House Judiciary Committee 's Antitrust Task Force that it is willing to sit down with retailers and negotiate over the issue of credit-card interchange fees, NACS said. Also, Visa and MasterCard have both announced that their complete operating rules would be publicly available soon.

At last week's hearing, c-store, gas station and other retailers testified in support of HR 5546, the Credit Card Fair Fee Act, bipartisan [image-nocss] legislation that would end credit-card industry price fixing. Representative John Conyers (D-Mich.), chairman of the House Judiciary Committee, introduced the bill that would create a panel to determine interchange rates and terms. ( Click here to view previous CSP Daily News coverage.)In response to testimony by NACS vice chairman of government relations Tom Robinson, president of Robinson Oil Corp., San Jose, Calif., that retailers can negotiate processing expenses with their local banks, but that interchange rates were off the table, Joshua Floum, general counsel for Visa Inc., volunteered to meet with Robinson immediately after the hearing and begin negotiations on interchange rates, according to NACS.

Similar offers in the past have been disingenuous, but the offer was made, the group said. "We are somewhat skeptical, but will be looking into the potential of the offer," John Eichberger vice president of government relations for NACS, told CSP Daily News. "There is no requirement [in the legislation] for them to negotiate, and there is no requirement for the parties to reach an agreement."

Any such negotiations would "absolutely not" obviate any legislation or lawsuits against Visa and MasterCard, Eichberger added. NACS is still evaluating what negotiations could mean for retailers.

Critics say the legislation amounts to government price controls and would hurt smaller banks and credit unions that cannot afford to cut fees like bigger banks, said a Reuters report. Visa and MasterCard officials warned the legislation could lead to higher costs for consumers.

"This proposed legislation would replace a competitive, free market system with price controls," Floum testified. "These smaller institutions rely on interchange to keep their card programs running."

Joshua Peirez, chief payment system integrity officer at MasterCard Worldwide, pointed to a study in Australia that showed government regulation resulted in higher annual fees for consumers because merchants did not pass on the savings. "The merchants benefited from reduced costs of accepting cards while consumers paid the price," Peirez said.

Conyers defended the bill, saying, "We do not think this is regulation of the industry."

Retailers such as grocery and drug stores complain that Visa and MasterCard set non-negotiable fees for transactions and the system lacks transparency.

Consumer group the U.S. Public Interest Research Group said it supports the legislation because it would create a mechanism pressuring both merchants and the credit card companies to negotiate fees. "The panel [would] not set prices or establish government price controls," said Edmund Mierzwinski, consumer program director at U.S. PIRG. "It is an oligopolistic market in which a small set of cardholders dominate the market and establish a set of deceptive practices."

The bill has little chance of becoming law this year due to Republican opposition and the dwindling number of congressional work days left before the November election, Reuters said.

Conyers's bill would apply only to the dominant electronic payment companies—Visa and MasterCard.

MasterCard also testified that over the past four years, in response to concerns expressed by merchants regarding the secrecy of its rules, the company has been releasing portions of its rules as they relate to merchants. Peirez testified that MasterCard has now begun the process of making its complete set of rules available online, said NACS.

Click hereto view NACS Government Relations' Credit-Card Fees page.